The Legal Mechanisms to Control Bribery and Corruption

‘The Legal Mechanisms to control Bribery and Corruption’

Dr. Nicholas Ryder

Professor of Financial Crime

Department of Law

Faculty of Business and Law

University of the West of England

Introduction

Bribery and corruption have received a great deal of coverage since the introduction and implementation of the Bribery Act 2010 and the extension of the remit of the Serious Fraud Office.[1] Bribery has been defined “giving or receiving [of] something of value to influence a transaction”.[2] It has also been argued that a can include “money … other pecuniary advantages … [and] non-pecuniary benefits.[3] It has been suggested that bribery can be divided into two categories – direct and indirect.[4] The latter of which is normally conducted through an agent and arises where the respective parties agree to meet in an attempt to gain a competitive advantage. The agent is paid a commission from the additional revenue generated by the resultant work or trade.[5] Denning, citing Latymer, stated that bribery was regarded as “a princely kind of thieving”,[6] yet despite these simple definitions, it is still a very difficult term to define.[7] This is clearly illustrated by the wide range of statutory definitions offered by the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Act 1906 and the Prevention of Corruption Act 1916. This uncertainty was clarified by the Bribery Act 2010. The chapter begins by outlining criminalisation of bribery by virtue of the Bribery Act 2010. It then identifies the United Kingdom’s bribery policy,[8] which is administered by the Ministry of Justice and enforced by the SFO in conjunction with the Financial Conduct Authority.[9]

The extent of Bribery

Bribery poses a significant threat to the UK. It has been suggested that it can undermine market integrity, business confidence and adversely affect society.[10] Any attempt to accurately measure the extent of bribery and corruption methodologically flawed. It has been estimated $1tn is paid in bribes on a worldwide basis each year.[11] This is also backed up by the World Bank.[12] Furthermore, it has also been suggested that “$1tn in bribes are paid each year out of a world economy of $30tn – 3 per cent of the world’s economy”.[13] The introduction of the Bribery Act 2010 could be regarded as one of the “the single most important development” in combating white collar crime.[14] Its introduction has also in some observers arguing that it “provides the UK with some of the most draconian and far-reaching anti-corruption legislation in the world”.[15]

The Criminalisation of Bribery

Prior to the Bribery Act 2010, the criminal offence of bribery was contained in the of the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Acts 1906 and the Prevention of Corruption Act 1916. These legislative measures were unsatisfactory,[16] and required urgent amendments to ensure that the UK’s complied with its international requirements to tackle bribery.[17] It is therefore unsurprising that this body of legislation was often described as “inconsistent, anachronistic and inadequate”.[18] It has been suggested that the motivation to reform of the law of bribery was ignited by the recommendation of the Committee on Standards in Public Life.[19] This was followed by the publication of a series of proposals by the Law Commission in 1998.[20] Other bribery related statutory measures included the Anti-terrorism, Crime and Security Act 2001 [21] and the Criminal Justice and Immigration Act 2008.[22] However, it wasn’t until the implementation of the Bribery Act on July 1st 2011 that the four current bribery offences were introduced.

It is a criminal offence if a person promises or gives a financial or other advantage to another person and the recipient intends the advantage to “to induce a person to perform improperly a relevant function or activity, or to reward a person for the improper performance of such a function or activity”.[23] Furthermore, a person is guilty of an offence it a person “promises or gives a financial or other advantage to another person”, and that the person “knows or believes that the acceptance of the advantage would itself constitute the improper performance of a relevant function or activity”.[24] Furthermore, the Bribery Act 2010 criminalises conduct were a person ‘(R)’ commits an offence if the circumstances apply. Case 3 is where R requests, agrees to receive or accepts a financial or other advantage intending that, in consequence, a relevant function or activity should be performed improperly (whether by R or another person).[25] Case 4 is where R requests, agrees to receive or accepts a financial or other advantage, and the request, agreement or acceptance itself constitutes the improper performance by R of a relevant function or activity.[26] Furthermore, case 5 is where R requests, agrees to receive or accepts a financial or other advantage as a reward for the improper performance of a relevant function or activity.[27] Finally, case 6 is where, in anticipation of or in consequence of R requesting, agreeing to receive or accepting a financial or other advantage, a relevant function or activity is performed improperly by R, or by another person at R’s request or with R’s assent or acquiescence.[28] Therefore, a person commits an offence if they wish, consents to, or accepts an advantage with the specific purpose that they will perform a relative function or activity improperly either by himself or by another person, or as a reward for such a performance.[29] The mere request, agreement or acceptance of a benefit constitutes improper performance and it does not matter whether the advantage is received directly or through a third party nor whether the benefit is to those same parties or another.[30] This applies to instances where the improper performance has either been done or is yet to be done by the person or someone acting under his instruction or acquiescence. Furthermore, a person commits an offence of bribing a foreign public official if they intend to influence the official in their capacity as a foreign public official.[31] Additionally, the accused my “intend to obtain or retain business, or an advantage in the conduct of business”.[32] Therefore, a person guilty of the offence if they seek to manipulate or induce the official in the performance of their role as a public official with the intention of obtaining or retaining business or a business advantage.[33]

Importantly, the Bribery Act 2010 introduces a new form of corporate criminal liability,[34] and now provides that a commercial entity is guilty of an offence if a person associated with the organisation bribes another, intending to obtain or retain business or a business advantage for that organisation.[35] However, in order for the commercial entity to be culpable, the organisation must be stipulated as a “relevant commercial organisation”.[36] For the purpose of this criminal offence, an “associated person” is an individual who “performs services for or on behalf of’ the organisation,[37] with the person being, for example, the organisation’s agent, subsidiary or employee”.[38] The extent of this criminal offence is wide and it seeks to include a wide range of people who may be committing bribery on behalf of a third party. However, to be an “associated person”, the accused “must be performing services for the organisation in question and must also intend to obtain or retain business or an advantage in the conduct of business for that organisation’.[39] The introduction of the corporate criminal liability provision is innovative and represents a new approach towards the law of bribery.[40] It is interesting to note that there is no requirement to prove that the activity was committed in the UK or elsewhere. Indeed, there is no need to even show a close connection to the UK as is needed for the other bribery offences under the Bribery Act 2010.[41] It is a defence to the corporate criminal liability provision if the entity is able to determine it had adequate procedures designed to prevent persons associated with the commercial organisation from bribing another person.[42] The Ministry of Justice has stated that liability will be determined on a balance of probabilities.[43] The Ministry of Justice has published six general principles of adequate procedures which include proportionality; top-level commitment to anti-bribery measures; risk assessment; due diligence; communication and monitoring and review.[44] If the commercial entity is able to demonstrate that they have adequate procedures, then no offence has been committed. This is a complete defence. Additionally, the Bribery Act 2010 provides a general defence for those charged under with breaching the Acts provisions. Section 13 of the Act provides that it is a defence for a person charged with a relevant bribery offence to prove that the person’s conduct was necessary for “the proper exercise of any function of an intelligence service, or the proper exercise of any function of the armed forces when engaged on active service.[45] The purpose of the section 13 defence is to permit the intelligence services, or the armed forces to undertake legitimate functions which may “require the use of a financial or other advantage to accomplish the relevant function”.[46] It has therefore been introduced to allow for operational necessities. To rely on the defence, the defendant needs to prove, on the balance of probabilities, that their conduct was necessary.

Policy background

The UK’s bribery strategy is based on the international legislative measures introduced by the United Nations,[47] the European Union [48] and the Organization for Economic Cooperation and Development.[49] In 1994, the OECD accepted a recommendation that required member states to “take effective measures to deter, prevent and combat the bribery of foreign public officials in connection with international business transactions”.[50] This was strengthened by the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.[51] Additionally, the EU introduced its first bribery measure in its Convention of the European Union on the Fight against Corruption involving officials of the European Communities or officials of member states.[52] In 1997, it approved a Convention on the Fight against Corruption involving Officials of the European Communities or Officials of Member States.[53] Furthermore, the UN introduced its Convention against Corruption in 2003. The OECD Convention, was signed by the UK in in 1997.[54] The UKs initial response to these conventions was the passing of the Anti-Terrorism, Crime and Security Act 2001. This was only ever meant to be a transient and temporary instrument until more comprehensive corruption legislation could be introduced.[55] The UKs reform of its bribery laws began with the publication of a Law Commission Report in 1998.[56] The Law Commission recommended that “the common law offence of bribery and the statutory offences of corruption should be replaced by a modern statute”.[57] The government responded by publishing a Corruption Bill, which was rejected and resulted in a revised version being published in 2005.[58] This was followed by another consultation exercise in 2007,[59] which led to the publication of its 2008 Report.[60] The Report was followed by the publication of a White Paper that resulted in the enactment of the Bribery Act 2010.[61] The introduction of the Bribery Act 2010 has received a mixture of responses from commentators. For example, it has been suggested that the provisions “go too far and fear [that] the new ‘gold standard’ legislation poses a threat to UK competitiveness”.[62] Other concerns relate to the increased prosecutorial powers under the Act and the compliance costs which firms in the UK are expected to meet.[63] Conversely, it has also been described as a “major piece of legislation, of immense practical importance to the conduct of business, whether in the public or private sphere”.[64] In many respects it is still too early to determine who is correct; although it should go without saying that the Bribery Act 2010 is significantly better than the UKs previous legislation.

Law Enforcement and Regulatory Agencies

The Bribery Act 2010 is enforced by the SFO and the FCA, the latter of which replaced the Financial Services Authority in 2013.[65] In addition to these agencies, the City of London Police investigates allegations of bribery and corruption.[66] As part of its efforts to reduce this type of financial crime, the SFO has placed “huge emphasis on raising awareness, education, persuasion, and ultimately prevention”.[67] The FSA was given a statutory objective to reduce financial crime under the Financial Services and Markets Act 2000.[68] Clearly, bribery falls within the definition of financial crime under this statutory objective, with bribery also being relevant to its then secondary statutory objective of maintaining market confidence.[69] Bribery affects the latter statutory aim because it can adversely affect the City of London’s reputation.[70] Therefore, the FSA identified the threat posed by bribery and stated that “the risk that firms could come under pressure to pay bribes, especially if they are operating in jurisdictions where paying bribes is widely expected. In addition, financial services firms may launder the proceeds of corruption or be used to transmit bribes”.[71] However, it is essential to note that the transition from the FSA to the FCA resulted in a significant amendment to the statutory objectives. Whereas the FSA had four uniform statutory objectives,[72] the FCA has been allocated a single wider objective to “ensure that markets function well”.[73] This is supported by three operational objectives: consumer protection, the integrity objective and competition.[74] Of particular relevance to this chapter is the integrity objective which includes “protecting and enhancing the integrity of the UK financial system” [75] and that the financial system must “not being used for a purpose connected with financial crime”.[76]